March 14, 2008
Knobias Clip Report (03-13-2008)
By admin
Submitted By Knobias ClipReport
SIGM: Inventory Overstock Hurts Revenue Expectations; Positions for BluRay
Trading on Sigma Designs, Incorporated (NASDAQ NM: SIGM) was down 19.002% following yesterday’s earning’s call in which the company reported Q4 2008 revenues of $76.40M, up 144.64% from a year ago and beating consensus by 1.14%. Adjusted Q4 EPS was $.80, up 196.30% from a year ago but missing consensus by 3.61%.
Although estimates were below consensus, the company stated during its earnings call that incurred costs in the quarter were mostly one-time in nature. In addition, inventory overstock by Motorola due to sales uncertainties in BluRay during the Christmas season caused Sigma to slash revenue expectations for Q1 after orders were pulled out of Q1 to offset it. Motorola bought $19M in product during Q3 and $21M in Q4. According to investment analyst BWS Financial, “It would be more likely to see ordering return to levels of the third fiscal quarter 2008 from Motorola in the second quarter 2009. As a result, BWS is ending its buy call and downgrading Sigma to Hold and a $35 price target.
Outlook for the IPTV market remains strong as the company expects to retain its market share for IPTV set top boxes and Linux in each of the major worldwide regions. Currently, it has 24 major telcos in active deployment using Sigma media processors for hardward technology. Among those, nine are based on the Microsoft Media Room Platform and will remain 100% sigma based. In this space, the competition factor remains minimal to SIGM through the end of calendar 2008. It is also believed that the push in IPTV at the carrier level would eventually lead to cable companies adopting the technology, which could create a much larger market potential for SIGM in the long-term. While competition in 2009 may potentially increase and slow down the sales cycle of SIGM receiving design wins, the company’s technology is expected to remain ahead as a result of its advances in the midst of minimal competition.
During the company’s February 2008 investor presentation, Sigma announced its intention to further address emerging markets, with growing revenue contributions on demand starting in the second half of 2008. With many manufacturers caught by surprise by how fast HD DVD withdrew from the market, Sigma is seeing a lot of design activies but doesn’t expect real revenue to kick in until June or July from second tier manufacturers in Taiwain and China, and anticipates a high volume increase for the next Chrismas season.
According to BWS, “SIGM seems to have taken an aggressive step towards addressing the BluRay player market before competition enters the market. Management estimates stand alone BluRay player sales to be approximately $5M in 2008. We believe this estimate could be for the US, as it would be very low on a worldwide level. We are forecasting worldwide BluRay sales to be approximately $10M-12M in 2008, and for SIGM to have market shares of approximately 50% by the end of the year.”
As many of Sigma’S competitors in BluRay have begun talking about developing front-end chipsets, Sigma’s already has the solutions to develop a front-end chip to support decoders and expect to have the technology developed for 2009. Addressing the competitive landscape, the company’s goal is to maintain between 30-40% over the long term. Said CFO Thomas E. Gay III, “Our current position as the market leader is helping us retain market share because a lot of competitiors are trying to get design wins to stick, but sometimes they bounces back to us because they didn’t have the full solution baked out as well as they thought. There’s a lot of dynamics involved in what’s happening, so hard to say at this what exactly our market share in the future will be.”
Visit 1800blogger to see all of our industry leading blogs.
Topics: Uncategorized |
Comments
« Market Comments Submitted by Nick at Ambitions as a Stock Trader | Home | Market Scan for Small Cap Stocks on March 13, 2008 »
